India Budget 2010-11, a mixed bag for real estate sector: NIREM

by Chief Economic, IDS NIREM*

26 February 2010

IDS National Institute of Real Estate Management (IDS NIREM) believes that contrary to the popular demand of and expectation for huge impetus to the housing and real estate sector, the India budget 2010-11 has brought a mixed bag for this sector. Though, some benefits have been extended to housing and real estate sector, the burden imposed will definitely undermine the benefits. The burdens and benefits for the real estate sector are as follows:

The burden:

·   Widening of Service Tax net:

Real Estate Developers will have to pay service tax on transactions where consideration is collected from prospective buyers prior to completion of construction. However, it seems service tax will not be applicable if the full payment is made after completion of the construction.

In addition, other services provided by the builders to prospective buyers such as providing preferential location or external or internal development charges (excluding vehicle-parking space) etc. shall also be covered.

Renting of immovable properties is also under service tax net and the definition of ‘renting of immovable property service’ has been clarified as well as widened to cover rent of vacant land under contract for undertaking construction of buildings or structures for business purposes. This may have negative effect on to the properties bought or to be bought solely for investment purpose.

Excise Duty on Cement:

Excise duty ion cement has been increased which will increase the cost of construction and it is expected that per unit cost for prospective buyers will also increase.

The benefits:

Some emphasis has been given to promote housing in general such as:

·   Extension of Interest subvention scheme upto March 31, 2011,

·   Extension of deadline for completion of pending housing projects by one year without losing tax holiday u/s 80-IB. However, MAT may affect the companies executing such projects.

·   Extension of 1% interest subsidy on housing loans upto Rs. 10 lakhs and where the cost of the property is under Rs. 20 Lakhs. This along with along with increase in the tax slab rates for individuals should provide the necessary demand boost for low-cost housing. 

·   Relaxation in norms for built-up area of shops and other commercial establishments in such eligible housing projects and

·   Increased budgetary allocations for urban development and housing schemes.

·   extension of investment linked deduction benefit to convention centres located in the NCR of Delhi extended from the present 31st March, 2010 to 31st July, 2010 (for purposes of deduction u/s Section 80-ID of the Income-tax Act).

Overall, this budget will have mixed affect on the Indian real estate sector. However, looking at the overall economic scenario, we also need to consider that the budget was presented against mutually conflicting objectives, where-in it is not possible to meet the demands of each individual sector. Another important aspect is that very clearly the Finance Minister took pragmatic approach instead of populist measures, which is a good sign of a growth orientated government.

*

IDS National Institute of Real Estate Management (IDS NIREM) is India’s first integrated centre of learning for Real Estate education, training, consulting & research. It currently offers courses in different areas of real estate management. For further Information, please contact:

Key changes proposed for real estate sector: PwC

Published on Fri, Feb 26, 2010 at 17:08   | Updated at Sat, Feb 27, 2010 at 11:07 Source: Moneycontrol.com

By PwC

Special emphasis has been given to promotion of housing and Hotel sectors. Benefits proposed for Housing sector include extension of Interest subvention scheme upto March 31, 2011, extension of deadline for completion of pending housing projects by one year without losing tax holiday u/s 80-IB, relaxation in norms for built-up area of shops and other commercial establishments in such eligible housing projects and increased budgetary allocations for urban development and housing schemes.

Proposed benefits for Hotels include extension of investment linked deduction benefit to new hotels of two-star category and above anywhere in India and extension of commencement date for two-star, three-star or four-star category hotel or convention centres located in the NCR of Delhi extended from the present 31st March, 2010 to 31st July, 2010 (for purposes of deduction u/s Section 80-ID of the Income-tax Act).

Certain immovable property transactions involving time gap between the booking of a property and the receipt of such property on registration excluded from anti abuse provisions relating to transfer of immovable property without adequate consideration.

Indirect tax proposals impacting the sector include increase in Excise duty applicable to cement and cement clinkers. Service Tax net has also been widened. Putting to rest all controversies regarding applicability of service tax on rental arrangements, definition of ‘Renting of immovable property service’ clarified and also widened to cover rent of vacant land under agreement / contract for undertaking construction of buildings or structures for business purposes. ‘Construction of complex service’ activity deemed to be a taxable service provided by the builder/promoter/developer unless entire consideration paid after the completion of construction. Additional services provided by builders to prospective buyers such as providing preferential location or external or internal development charges (excluding vehicle-parking space) covered.

Realtors dub budget 2010-11 as insufficient for the sector

PTI

Friday, February 26, 2010 19:10 IST

Mumbai: Even as shares of major realty firms rallied on the BSE boosted by Pranab Mukherjee's 'consumer friendly' budget, city-based realty players expressed their disappointment by calling it 'negative' for the sector.

The increase in excise duty on cement and clinker from the current 8-10% coupled with the hike in fuel prices is likely to pinch consumers indirectly as the cost of construction will go up.

"The cost of construction is certainly going to rise as excise duty on cement and clinker has been hiked to 10%. Even though it is a partial roll-back, this will hit property developers as also buyers," leading real estate developer Rustomjee's chairman, Boman Irani, told PTI here.

Irani, however, said that he was not expecting any significant rise in property prices. He also said that the sector expected the Government to further reduce service tax on the purchase of land, home sales and fresh constructions. However, the service tax has been maintained at 10%.

Last year, the tax was reduced to 10% from 12.5% due to the (economic) slowdown that led to falling revenues. Another leading real estate firm, Hiranadani Developers, also dubbed the budget as insufficient.

"The budget is insufficient, incomplete and impractical. Except the finance minister's proposal to extend the 1% interest till March next on loans for houses upto Rs20 lakh, no other benefit has been given to boost affordable housing," Hirandani Group's managing director, Niranjan Hiranandani, said.

He also said that the sector had sought cheaper capital and faster project clearances which has not been given any importance in the budget.

Similarly, real estate and retail advisory firm, Beyond Square Feet, said the Budget was highly disappointing as the Government had completely forgotten the retail sector, which is a key driver of the economy as well as the real estate sector.

"The finance minister has forgotten the retail sector completely even though it contributes more than 12% to the GDP. The Minister also forgot the promises made about the FDI for the retail sector. This will surely affect the realty sector as developers would not be keen on mall projects," the firm's chief Mall Mechanic, Susil Dungarwal, said.

Meanwhile, according to Sahara Prime City's CEO, Sushanto Roy, "the budget proves the Government’s pragmatic approach instead of a populist one. Though there are not too many big bang reform-centric announcements, but what has come as a relief to the markets is the absence of major negatives, barring the hike in MAT, increase in excise duties and increase in the levy of oil prices."

Despite higher social spending, the Government did not overshoot its FY-10 fiscal deficit target of 6.8% by too much, he said.

"I expect the realty and infrastructure sectors to gain from this budget. The infrastructure sector shall get benefited from higher Government allocation and from the proposal of a deduction of Rs 20,000 towards investment in infra bonds. The realty sector would also benefit from continued focus on strengthening existing affordable housing schemes and extension of tax exemption period for real estate projects from the existing 4-5-years," he said. Source: DNAIndia

Sobha Developers to reduce debt via land sale

Sobha Developers Ltd plans to cut debt by the end of FY11, banking on cash inflows and monetisation of land sales, a top official said on Tuesday.

"We used to have a debt equity (ratio) of 2:1 earlier. This has been brought down to 0.85:1, going forward it will be further brought down to 0.5:1, before the end of next financial year (FY11)," Managing Director J.C. Sharma told Reuters Trading India chatroom. Sobha Developers has around 3,000 acres of land spread across 10 cities, of which Bangalore accounts for about 31 percent of the total land bank.

The company expects to monetise around 1-1.5 billion rupees from sales of land, he said, but did not provide the location of land which the company intends to sell. It had received 540 million rupees from sale of land in the quarter ended Dec. 2009.

Sobha is also confident of selling 2-million square feet of space in FY10, he said. It has sold 166 units till date out of a total 310 apartments at the recently launched Sobha Garrison, a luxury residential complex for army personnel, in Bangalore. He said there is a revival in the realty industry, even though it would take another two-three quarters for it to come back to normal situation. There could be also some price corrections by the end of the year in "some pockets", like "Mumbai market, where office space costs more than in Manhattan", Sharma added.

The company is also planing to launch about 8 million square feet of space in the next 12-15 months time across four cities, Bangalore, Pune, Coimbatore and a new location in Chennai. Sobha has currently 5.6 million square feet of contracts on hand, he said. 

(Reporting by Rajesh Kurup; Editing by Prem Udayabhanu). Source: Yahoo News

US House Prices Fall Modestly in the Fourth Quarter

(TREN), Washington, DC – U.S. house prices fell slightly in the fourth quarter of 2009 according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted purchase-only house price index (HPI). The HPI, calculated using home sales price information from Fannie Maeand Freddie Mac-acquired mortgages, was 0.1 percent lower on a seasonally adjusted basis in the fourth quarter than in the third quarter of 2009. Over the year ending with the fourth quarter of 2009, seasonally adjusted prices fell 1.2 percent. The quarterly report analyzing housing price appreciation trends was released today by FHFA Acting Director Ed DeMarco.

Four-Quarter Appreciation U.S.

 

The decline in prices in the fourth quarter was much more significant when measured without seasonal adjustment. The unadjusted national decline was 1.5 percent, a much larger drop than the 0.1 percent decline measured on a seasonally adjusted basis.

FHFA’s seasonally adjusted monthly index for December was down 1.6 percent from its November value, reversing price increases over the prior months. The monthly change from October to November was revised downward to +0.4 percent, from an initial estimate of +0.7 percent. While the national, purchase-only house price index fell 1.2 percent from the fourth quarter of 2008 to the fourth quarter of 2009, prices of other goods and services rose 1.9 percent.

Accordingly, the inflation-adjusted price of homes fell approximately 3.1 percent over the latest year. FHFA’s all-transactions house price index, which includes data from mortgages used for both home purchases and refinancings, fell over the latest quarter. The index declined 0.7 percent in the latest quarter and 4.7 percent over the four-quarter period.

Significant Findings:

·         Of the nine Census Divisions, the Mountain and Pacific Divisions experienced the most significant price movements in the latest quarter. While prices fell 1.3 percent in the Mountain Division, typical price increases were 1.5 percent in the Pacific Division.

·         Seasonally adjusted, purchase-only indexes indicate that prices rose in the latest quarter in 27 states and Washington, D.C. Prices rose over the latest four quarters in 19 states.

·         As measured with purchase-only indexes for the 25 most-populated metropolitan areas in the U.S., four-quarter price declines were greatest in the Miami-Miami Beach-Kendall, FL area. That area saw price declines of 12.9 percent between the fourth quarters of 2008 and 2009. Prices held up best in the Washington-

·         Arlington-Alexandria, DC-VA-MD-WV area, where prices rose 10.6 percent over that period.

RBI changes definition of PIO for the purpose of FEMA

TREN, February 27, 2010; Reserve Bank of India has amended the definition of PIO vide its circular number 25, [ref. RBI/2009-10/ 286 A.P. (DIR Series)] dated January 13, 2010 for the purpose of purchase of immovable property in India by the People of Indian Origini (PIOs). 

In this regard, attention of Authorized Dealer Category-I banks has been invited to the existing clause (c) of Regulation 2 of Notification No. FEMA 21/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India), Regulations, 2000, as amended from time to time, in terms of which 'a Person of Indian Origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who:

(i) at any time, held an Indian Passport or 

(ii) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

However, Government of India, notified vide G.S.R.813 (E) in the Gazette of India dated November 12, 2009 [Notification No.FEMA.200/2009-RB dated October 5, 2009] an amendment to clause (c) of Regulation 2 of the Notification referred to above. Accordingly, 'a Person of Indian Origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sir Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who:

(i) at any time, held an Indian Passport or 

(ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). 

The circular also requests Authorised Dealer Category-I banks to highlight the amendments among their constituents and customers concerned. Source: GOPIO

DLF converts Mumbai mall project into residential one

Raghavendra Kamath / Mumbai February 26, 2010, 0:32 IST

DLF, the country’s largest realtor by market value, is planning to build a premium residential apartment complex at Worli in Mumbai instead of a high-end mall project, as demand for retail spaces has come down sharply, according to a company executive.

“We felt residential will do well here, and we will fix the price depending on market conditions,” he said. According to DLF website, the project is under “planning and development” under the high-end mall brand Emporio.

Rents of retail spaces are down by 25-30 per cent from their peak in 2007-08 as demand slowed. Though demand for office spaces have picked up slowly, property consultants expect lukewarm demand to continue for retail developments.

Worli, which was a former hub of textile mills, is witnessing modern office developments by realtors such as Indiabulls, Bombay Dyeing and Century Textiles, and residential apartments command a price of Rs 22,000 per sq ft and above.

DLF made news in 2005 when it bought a 17-acre Mumbai Textile Mill land from National Textile Corporation (NTC) for Rs 702 crore. The company at that time announced it would build a futuristic retail-cum-entertainment complex on the land.

The new project is expected to be launched in the next four-five months after taking all the necessary approvals, the executive said.

According to property consultants, the company changed the plan several times as real estate market went through a prolonged slowdown.

However, DLF is not alone which converted its mall project into a residential one. Host of others such as DB Realty in Dahisar area of Mumbai, West Pioneer in Kalyan near Mumbai and TTK group in Bangalore also changed their plans to build mall to apartment projects.

Apartment prices have risen 15-20 per cent since mid-2009 as home buyers returned to the market. Earlier, prices had declined by around 40 per cent as home buyers stayed away.

Buoyed by response for its apartment projects, DLF is expected to launch 8-10 new residential projects in the next one year, according to sources. DLF, which stalled some of its office projects during the slowdown, is planning to launch two-three commercial projects in Gurgaon and Hyderabad.

DLF today sold 1,200 units of independent floors in its Panchkula Valley housing project in Chandigarh within a week of its launch. Source: Business Standrad

Trikona Advisers claims Rs 800 cr damages

BS Reporter / Mumbai February 24, 2010, 0:54 IST

Trikona Advisers (TAL), the erstwhile advisor of UK-based, India-focused real estate company Trikona Trinity Capital Plc (TRC), today said it would claim £112 million (Rs 800 crore) in damages from the latter for “unlawful attempt to terminate’’ the management agreement with it.

TAL said TRC, a London Stock Exchange-listed company, terminated the agreement six years earlier than the scheduled ending. The agreement was for 10 years, from April 16, 2006, it said.

On December 10 last year, TRC announced termination of the portfolio management agreement with TAL, alleging breaches by the latter. In reply, TAL said it would seek substantial damages if the agreement was terminated on March 16, the scheduled date of termination.

TRC has investments in Uppal IT park in Greater Noida, Rustomjee’s township in Mumbai, DB Hospitality and DB Realty, among others.

TAL has already moved the London Court of International Arbitration (LCIA) against TRC. In a press statement, it claimed two hedge funds were responsible for the trouble. According to TAL sources, QVT and Carrousel had forced changes in the TRC board and its representatives now had major positions on it.

“For over two years now, TRC has been under attack from two hedge funds. They took a position in the Fund because of the successful performance and returns created under the management of TAL, but are now seeking an exit,” a spokesperson of TAL said.

“These hedge funds have a track record of activism and for closing down funds early in the cycle to realise cash for short-term gains, and this is what is happening to TRC,’’ the spokesperson added.

TAL cited examples of AIM-listed entities — Treveria plc, the German retail-focused real estate investment company, India’s Hiranandani family’s investment vehicle, Hirco, and South African Property Opportunities — wherein the hedge funds demanded the exit of directors, including incumbent chairmen.

“Our management contract stands in the way of their strategy because it lasts for 10 years, so we are being unfairly treated publicly and falling victim to their strategy,’’ the TAL spokesperson said.

It said it had instructed a number of law firms to invoke its contractual rights, including London law firm SJ Berwin LLP, to pursue TRC. However, TRC seems in no mood to budge. Source: Business Standrad

Nariman Point is fifth most expensive office location

24 Feb 2010, 0138 hrs IST, PTI
NEW DELHI: Mumbai’s Nariman Point area is the fifth most expensive office location in the world with an average annual rental of $107 per sq ft, according to a survey conducted by realty services firm Cushman & Wakefield. 

NEW DELHI: Mumbai’s Nariman Point area is the fifth most expensive office location in the world with an average annual rental of $107 per sq ft, according to a survey conducted by realty services firm Cushman & Wakefield.

Mumbai’s central business district edged past Russian capital Moscow in the latest survey and is preceded by Tokyo, London West End, Hong Kong and Dubai. The survey was conducted in 123 key locations in 63 countries across the world. Cushman & Wakefield, however, said the rental rates in the heart of India’s financial capital has dipped by around 20% in 2009, compared with the year-ago period.

Tokyo CBD is the most expensive office location in the world with an average annual rental rate of $190 per sq ft.

In the Asia Pacific region, India retained its last year’s position in the top ten capturing three slots — Mumbai CBD, Mumbai Worli and New Delhi CBD, at the third, fourth and fifth position respectively.

“Rental corrections experienced across India in 2009 have made the office market more attractive for end-users. With corporates reconsidering expansion plans and anticipating rationalising of rental values, we expect the demand in 2010 to be buoyant,” Cushman & Wakefield executive director Occupier Service Arvind Nandan said.

The focus is likely to be on the key markets of NCR, Mumbai and Bangalore in the early part of the year, he said. Source: Economic Times

Wadia sells Mumbai building to Axis for Rs 640 crore

25 Feb 2010, 0550 hrs IST, Nauzer K Bharucha, TNN
MUMBAI: A new four-storey commercial building at Worli is being sold for Rs 640 crore, pitching it as one of the costliest in the country. The Nusli Wadia-led Wadia Group has finalised the mega deal with Axis Bank, which is planning to shift its headquarters to the building. 

The deal generated a lot of interest in Mumbai's property market and some sources in real estate circles had pegged the price at Rs 900 crore. But this was discounted by a senior representative of a leading financial institution who was said to be aware of the nitty-gritties of the transaction.

The Wadias were unavailable for comment. A spokesperson for Axis Bank said: "At this point of time we do not have any comments to offer."

The building, Wadia Tower A, located in the Bombay Dyeing Mill compound on Pandurang Budhakar Road, has a saleable area of over 4 lakh square feet. It works out to Rs 16,000 a square foot.

The representative of a global property consultancy firm said: "A deal of this magnitude for a ready building is unheard of. This is by far the largest of its kind."

Axis Bank, one of the three largest lenders in the country, plans to move out of its existing offices in Maker Towers in Cuffe Parade and set up its headquarters in Wadia Tower A. Several financial sector companies have already relocated to new business centres like the Bandra-Kurla Complex and Kalina.

The Wadias, considered to be one of Mumbai's biggest land owners, control 64 acres in prime central Mumbai where they are also developing 1 million square feet of residential space. Source: Economic Times

Real estate body to build houses in flood-hit districts

BS Reporter / Chennai/ Hyderabad February 25, 2010, 0:20 IST

The Andhra Pradesh Real Estate Developers' Association (APREDA) will sign an agreement tomorrow with housing project directors in Kurnool and Mahaboobnagar districts for constructing houses in the flood-affected districts.

APREDA will participate in construction of 253 houses in Peddakothiliki village of Nandarvarm mandal in Kurnool district under the relocation scheme and 440 houses in Rajole village Mahaboobnagar district under the in-situ repair and rebuilding scheme.

The state housing corporation will take up the construction of the houses and APREDA will partly finance and oversee the timely delivery and quality of construction, said APREDA vice president R Chalapathi Rao in a press release.

Affordable housing complexes from NBCC stable

Atanu Kumar Das / New Delhi February 19, 2010, 13:47 IST

State-owned National Buildings Construction Corporation Ltd (NBCC) is coming up with affordable housing complexes in Uttar Pradesh, Gurgaon, Kolkata, Kochi and Patna.

The Mini Ratna PSU under the urban development ministry plans to build 7,000 houses each in Delhi-Saharanpur Highway, UP and Gurgaon. While the minimum price of a two-bedroom house will be Rs 7 lakh, the maximum can go up to Rs 14 to Rs 15 lakh.

NBCC has allotted 448 affordable houses in Rajarhat, Kolkata, where the price of a two-bedroom flat is Rs 14 lakh and a three-bedroom flat costs Rs 18 lakh. It will allot another 352 houses in the next phase of the project.

While the projects in Kochi and Patna are likely to be started in the next six months, the Gurgaon and UP projects are expected to be completed in the next two years.

“Affordable housing is the need of the day and the prices at which we are providing houses are very lucrative. We have sold apartments in Kolkata at Rs 1,325 per sqft and that is half the current rates of the market,” said Arup Roy Choudhury, Chairman and Managing Director, NBCC.

The company hopes to grow its turnover to Rs 3,000 crore this fiscal, compared to Rs 2044 crore in the previous financial year.

Apart from building residential projects, NBCC is also working on numerous power projects of BHEL, NTPC and others. “We do a lot of power projects, which account for 15-to-20 per cent of our revenue. Our primary profitability comes from these projects,” said Choudhury.

The company is also constructing 500 ministerial bunglows in New Moti Bagh, Delhi, with an area comprising of 123 acres of land. Source: Business Standard

DLF pricing its New Delhi project 60% higher

Vivek Seal / DNA

Wednesday, February 24, 2010 3:36 IST

New Delhi: In the strongest endorsement yet of the turnaround in the real estate sector, DLF Ltd, India’s largest developer, is pricing its housing project in Delhi 60% higher than its previous launch.
The project, Capital Greens 3, which is expected to be launched next month, has been tentatively priced at Rs 12,000 per square foot, according to real estate brokers.

Phase I and II of the Capital Greens project, which waslaunched in April and October last, were sold off in a couple of days as they were priced at Rs 5,500 per sq ft and Rs 7,500 per sq ft, respectively, much lower than the then-prevailing price of Rs10,000 sq ft.

DLF had recently indicated in a conference call that demand for luxury homes is back so it would launch some projects in this year.

Phase III of Capital Greens has been termed as a luxury project by the developer with offerings of four-bedroom apartments of 2,600 sq ft in 26-28 storey buildings.

The higher pricing was helped by recent healthy sales in the luxury home segment, as DLF sold more than 550 apartments of about 2 million sq ft in the National Capital Region, while it booked about 1 million sq ft of sales in the mid-income housing segment in new Gurgaon, Bangalore, Goa and Kochi.

Analysts said DLF’s margins were negatively impacted earlier because of the slew of launches in the affordable housing segment last year. Source: DNAIndia

New real estate law in Dubai to tackle failing developers and cancelled contracts

More new real estate laws being considered for Dubai which will give investors grounds to cancel their contracts if they fall victim to failing developers and aimed at restoring confidence in the emirate’s property market.

The real estate investor protection law, which is being looked at by the Land Department of Dubai, will detail grounds upon which a property buyer may demand cancellation of a contract.

Dubai new property law  

Grounds for cancellation would include a developer’s refusal to link payments to construction milestones, or if he makes material changes to specifications. The law will also deal with refund or replacement issues in the event of a material defect and financial penalties for delay in delivery.
 
‘There are lessons to be learned from the crisis and we are emerging with a new legal regime. Loopholes in laws are being dealt with and things will become more organised in 2010,’ said Emad Eldin Farouq, senior legal adviser, Land Department.
 
The move is designed to restore confidence to Dubai's real estate market which has been badly hit by the impact of the global economic crisis. House prices in some areas of the city have fallen by 50% during the downturn.
 
Currently there is no recourse for investors seeking cancellation of a contract even in cases where construction has not commenced even after years. In May 2009, the Land Department set up a committee to decide on cancellation of unviable projects but no official announcement has been made of any cancellation.
 
Meanwhile, it has been announced that Saudi Arabia is to have its first mortgage law soon aimed at boosting the real estate industry and allowing banks to diversify their balance sheets.
 
Saudi Arabian central bank governor Muhammad al-Jasser said that the Shariah compliant legislation which has been discussed for the past two years will consist of five parts. It will define the terms of mortgages, how they are designed, how they are granted, how companies are licensed and how procedures will be enforced.
 
The law is on the way to the council of ministers before going to the Shura Council, the country’s consultative assembly, for final approval, he added.
 
‘It will be a qualitative jump in the way we finance housing in the country and in the way we use financial instruments that are linked to the housing market. Hopefully, the mortgage law will ensure the production of sufficient sukuk and corporate bonds that will be held by banks in lieu of government bonds,’ al-Jasser explained. Source: Propertywire

SEZ concession sought for residential housing projects

Sunil Mantri, Chairman, Sunil Mantri group

The Government must continue the tax benefit under Section 80 IB to create huge housing stock, particularly in budget segment across the country.
This may help in the creation of approximately 10 million housing units in 5-7 years, which is almost 50 per cent of Government estimated housing shortage as on date.
Currently, a retail customer for a loan up to Rs 30 lakh is being treated as priority sector.
However, developers who are undertaking such projects are not treated as a priority segment; allowing this will help serve, particularly the low-income/middle-income group.
It will boost huge creation of the affordable housing if loans to these projects are considered as for priority sector.
SEZ creation has led to a lot of activity in the industrial and production centres.
In a similar way, if affordable housing for residential SEZ can be created in large projects of above 25 acres, it will reduce substantially the construction costs as well as help in creating satellite townships which will reduce the burden and pressure on the cities. The Government only needs to give the SEZ concession (which would be called residential SEZ) and would create a large number of the houses across the country. Source: Hindu BusinessLine

Maharashtra to reward green buildings

Our Bureau
Mumbai, Feb. 16
From April 1, Maharashtra Government is planning to introduce an amendment in Development Control rules, which will help in adhering to the norms of eco-friendly housing projects in the State, said the Chief Minister, Mr Ashok Chavan, at an industry function on Tuesday.
The government is also planning to offer free FSI to housing projects who will manage to get Zero Energy Certification, he said.
“The need of the hour is to take note of the climate changes recorded, which unfortunately is not encouraging. Hence, the State Government is inclined to introduce legal provisions by April 1 for stricter adherence to eco-friendly projects, more so in the housing sector. At the same time, we also intend to incentivise such initiatives. The incentives will not only be offered to upcoming projects, but also to constructed buildings that initiate eco-housing,” Mr Chavan added.
He said that the Maharashtra Government will soon sign a memorandum of understanding with The Energy and Resources Institute (TERI) which will guide the State in conservation of water, electricity, solid waste management and keeping the right balance of industrial growth and environment. Source: Hindu Business Line

DB Realty Makes Lacklustre Debut

February 24 2010, 14:18:10 IST | PALLAVI S.

The Mumbai-based real estate developer raised over Rs 1,440 crore through the public float.

DB Realty has joined the list of firms who have failed to generate returns for IPO investors on their debut. The scrip opened at Rs 452, 3% lower than its issue price of Rs 468 (the lower end of the IPO price bracket of Rs 468-486), tanked over 10% before recouping some of its losses and is trading down 5% at the time of posting this report.

The Mumbai-based real estate developer raised over Rs 1,440 crore through the public float (managed by Enam Securities and Kotak Mahindra Capital) soon after the market went into a tailspin correcting 10% from its recent peaks.

DB Realty raised the money for construction and development of certain projects worth Rs 1,045 crore and repayment of loan from IDFC worth Rs 80 crore. The realty firm has outstanding loans of Rs 751 crore.

Investors in DB Realty-- Lehman Brothers, Trinity Capital and IL&FS who owned 5.37% each in the company pre-issue-- have cost of purchase below Rs 200. So, each of them is still sitting on unrealised gains of over 2.3x on their three-year-old investment in the company, as per VCCircle calculations.

Another entity who is making a neat pile is Walkinson Investments Limited, whose antecedents could not be ascertained. It had chipped in with Rs 525 crore through compulsorily convertible debentures in March 2009, which were converted into equity shares of the company last September. At the current price, it is estimated to be sitting on an unrealised gain of 65% on the 11-month-old investment.

Jointly promoted by Vinod Goenka and Shahid Balwa, DB Realty has 10 ongoing projects, aggregating approximately 18.61 million sq ft of saleable area. For the year ended March’09, it had total income of Rs 471 crore with net profit of Rs 145.8 crore. Source: VCCircle

PE-Backed Home Solutions To Merge With Pantaloon Retail

February 24 2010, 17:25:05 IST | MADHAV A CHANCHANI

Home Solutions has raised two rounds of funding from ICICI Venture and Kotak SEAF India Fund.

Kishore Biyani's Pantaloon Retail (India) Ltd is merging its subsidiary Home Solutions Retail (India) Ltd with itself. 

India's largest retailer said, in a filing to to the exchanges, that its board has approved demerger of the consumer durable, home furnishing, home improvement and furniture business from Home Solutions into Pantaloon.

Home Solutions has raised two rounds of funding from ICICI Venture and Kotak SEAF India Fund. The two private equity funds invested Rs 120 crore in Home Solutions back in 2006. ICICI Venture and Kotak SEAF also invested in the Rs 150 crore rights issue by the company in early 2009. The move is likely to give these investors liquidity and avenue for an eventual exit.

Pantaloon last year said, it was considering merger with Home Solutions to "have better synergy and efficiency in the retail business."

Home Solutions is a retailer of products like electronics, consumer durables, furniture and home improvement products, which are retailed under different brand names. These include eZone (high end consumer electronics specialty store), Collection I (luxury furniture & furnishings) and HomeTown (home improvement store).

Currently Pantaloon holds nearly 67% stake in Home Solutions while the rest is held by other shareholders, which includes ICICI Venture and Kotak SEAF. These other shareholders will now be allotted equity and preference shares in Pantaloon Retail in lieu of their stake in Home Solutions.

For nearly 10 million shares of Rs. 10/- each of Home Solution, Pantaloon will allott 5,928,818 equity shares of Rs. 2/- each and 6,347,635 preference shares of Rs. 100/- each. The preference shares will be convertible into one equity share of Pantaloon within twelve months from the date of allotment or July 31, 2011, whichever is earlier, according to the filing.

These shares, including the preference shares upon conversion, would be worth Rs 470 crore based Pantaloon's closing price today of Rs 383.3. The deal is subject to approval from the shareholders, court and other authorities.

According to its latest annual report, Pantaloon has invested Rs 165 crore in Home Solutions business till June 2009. It operates retail formats like Home Town, E-zone, Home Bazaar, Furniture Bazaar and Electronics Bazaar. During FY09, Home Solutions registered an income    of Rs 1,071 crore and a loss of Rs 5.73 crore. Source: VCCircle

Asian Hotels Splits into 3 Entities

The 28-year-old partnership that brought the Hyatt hospitality brand into the country has formally ended with the three key promoters creating three distinct entities. Sushil Gupta, Shiv Jatia and Umesh Saraf, who came together to establish the three Hyatt properties under the umbrella of Asian Hotels Ltd, have got the Delhi High Court’s nod for a de-merger, thereby splitting the erstwhile company into three separate firms. The three Hyatt properties in the country will now be operated by three companies. While Shiv Jatia will run Hyatt Regency in New Delhi, Sushil Gupta will have control of the Hyatt Regency in Mumbai via Chillwinds Hotels Ltd. Similarly, Umesh Saraf will operate the Hyatt Regency, Kolkata through Vardhman Hotels Ltd.

On Wednesday, Asian Hotels announced the company’s name stands changed to Asian Hotel (North) Ltd. It is understood that the same will be undertaken for the other two firms involved in the de-merger. As on October 31 last year, R K Jatia and the Shiv Jatia Group held 26.8 per cent in Asian Hotels, while Saraf Industries and Forex Finance, representing the Saraf interests, held 15.16 per cent in the company. The Gupta group held another 17.25 per cent. “The three groups have been together for almost 30 years. However, each of us have our own interests and want to pursue our own plans. By undertaking the de-merger, it is a win-win situation for all of us,” Sushil Gupta told Business Standard.

He added that, despite the de-merger, there would be cross-holding across the three companies for sometime, but did not divulge the details of this arrangement. In its filing before the Delhi High Court, available on the BSE website, Asian Hotels said the three promoters have independent interests in the hospitality industry, “which may create potential conflict of interest situations”, leading to an impact on shareholders’ interests. Therefore, with an eye on minimising conflict of interest and maximising growth and future prospects, the Kolkata and Mumbai undertakings should be transferred and vested in Chillwinds Hotels and Vardhman Hotels respectively, the petition argued.

It is understood that the three constituent groups were exploring opportunities to establish properties across geographies, which could have led to some discord. Gupta, for instance, intends on setting up a hotel in Delhi. Moreover, Magus Estates and Hotels, part of the Jatia Group, has already opened a Four Seasons property in Mumbai and is scouting for other locations. Source: indianrealtynews.com

Positive Outlook for Global Office Market in 2010: Report Released by Cushman & Wakefield

Cushman & Wakefield, among the world's top real estate consultants, has released its latest edition of report on the Office Space Across the World, providing detailed analysis of prime offi ce property rental performance and occupancy costs across the globe in the twelve months to December 2009.

According to the report, the weakness in the global economy impacted on the occupational market in every corner of the world in 2009. Vacancy rates increased and, coupled with declining occupier demand, rents fell in the majority of markets as the pendulum swung firmly in the occupiers’ favour. Globally offi ce market rents decreased by 10%, the first aggregated global fall recorded since 2003. No market escaped and rents were down in every region; a trend not previously seen.

Asia Pacifi c recorded the steepest decline year on year, with rents falling on average by 16%. Th e overall fall in rents was mainly driven by sharp falls in the key fi nancial markets in the region. Singapore, Hong Kong and Tokyo recorded falls of 45%, 35% and 21% respectively, although Ho Chi Minh City saw the largest
compression in rents with a fall of 53% recorded, as the supply of Grade A space rose sharply.

The report further explains that the varying speed of rental falls coupled with currency fluctuations saw some movement in terms of the relative cost of locating in cities across the world. While the top 3 most expensive locations remained constant, Tokyo was ranked number one in the world and London West End moved into second place, as Hong Kong fell from fi rst to third position.

The report, based on its research, predicts that most of the global economies are expected to see positive GDP growth in 2010 and greater certainty should see improved occupier confidence. This should start to translate into better levels of occupational demand throughout 2010. The scale of the recovery is likely to vary not only from region to region but intra regionally too. The lack of signifi cant construction in most cities, coupled with more limited occupier space rationalisation means that vacancy levels are anticipated to peak in most cities during 2010, with very few characterised as having a signifi cant oversupply.

However, there will be a number of markets where new speculative development completions are still anticipated to be high which will dampen any rental recovery. Read the complete report at Cushman & Wakefield.

Asia Retail Congress 2010 says Reliance Footprint is the best

Awards 'Best Retailer' award in the non apparel and footwear category

New Delhi, Delhi, February 22, 2010 /India PRwire/ -- Reliance Footprint, the footwear specialty store of Reliance Retail was adjudged 'The Best Retailer of the year' in the non apparel and footwear category at the Asia Retail Congress 2010 Awards held recently. Reliance Footprint has achieved this distinction within 2 years of its operations.

Reliance Footprint which has established an impressive network of 17 stores across 15 cities is focused on presenting international standards of service, product range, quality and shopping experience to the consumers in India. Today Reliance Footprint is known to offer unmatched choice at unbeatable price in an environment which meets world-class standards of service, quality and display.

On the occasion, Mr. G. Sankar, CEO, Reliance Footprint said, "We are thrilled at winning the Best Retailer of the Year Award in the footwear and non apparel category at the Asia Retail Congress 2010. With our variety of product choice and unique shopping experience we have been able to initiate a definitive change in the footwear retail industry in India and this award is a testimony of our efforts. The award is dedicated to all our customers who have reinforced their confidence in our stores and given us an opportunity to serve them."

DTC and its impact on properties

The Direct Tax Code (DTC) is a major evolutionary step in the direct tax history of the country, which is all set to change the entire financial landscape of India.


Feb 21, 2010 – The Direct Tax Code (DTC) is a major evolutionary step in the direct tax history of the country, which is all set to change the entire financial landscape of India. As it spells major change, it will require a fairly in-depth study before all its implications can be understood and assimilated. On the face of it, DTC may have benefited Indian tax payers due to some of its moves, but it looks like a dampener for the Indian realty industry. Moreover, it is likely to undergo many changes and corrections before it is finally enacted. Hence commenting on DTC is a minefield. With these qualifications let us analyse some aspects that will apparently impact the property market. First, there is a significant change in the way income from house property is calculated under DTC, most of which is adverse from the point of view of residential property investments.

1. Tax on every property: Current tax provisions provide for paying tax with respect to every property (except a self-occupied property) whether let out or not, based on contractual rent and where that is not available then based on a reasonable rent. There is also provision for a vacancy allowance in case of property that has been previously let out at any time.Under the DTC Bill, tax is payable on all properties on the basis of a higher contractual rent or presumptive rent. The provision for vacancy allowance has also been deleted. In most cases the local authorities have now moved to a market value based rateable value. Possibly the presumptive rate has been kept at a middle value of 6 per cent considering that commercial properties can be rented out at around 8 per cent of the market value. Of course this simplicity works against residential property ownership. Since the income is higher of contractual rent or presumptive rent the end result will be taking completely non-existent income as income. Thus whether or not a tenant is available for the premises, it forces the owner to pay tax on income.Without the protection of the vacancy allowance that is available under the current tax laws this single change will drive investors out of the market. Some may argue that not having investors may not necessarily be a bad thing but it may not be an ideal situation either.

2. Unclear clause: The words for not applying this income clause to one non-let-out property (equivalent to a self-occupied property under the current provisions) are a little unclear and if left unchanged can jeopardise even this small relief.

3. Gross rent: For let out properties the standard deduction has been reduced from 30 per cent to 20 per cent of the gross rent.

4. Deduction: Deduction is available on all properties for local taxes and service tax to the extent paid.

5. No deduction for interest: There is no deduction for interest for non-let-out properties where the income is taken as nil unlike the current provision where this is available up to Rs 1, 50,000.

6. Principal payment: There is no provision for deduction on the principal payment of the loan taken to buy a home. ......http://www.maaproperties.com/Pages/ModuleContent.aspx?Mo ...

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TN mulls blacklisting builders violating norms

Our Bureau
Chennai, Feb. 19
The Tamil Nadu Government will consider blacklisting developers, builders and related professionals who repeatedly construct buildings that deviate from the approved plans, said the Minister for Town Planning and Urban Development, Mr Parithi Ellamvazhuthi.

Inaugurating FairPro 2010, a three-day property fair by the Confederation of Real Estate Developers Association of India – Tamil Nadu, the Minister said that the State Government is considering the proposal to regulate developers. The Chennai Metropolitan Development Authority and the concerned local bodies will not give permission for proposals submitted by builders who have deviated from approved plans in earlier projects and will even blacklist them if they repeatedly break the rules.

Emulate FMCG sector
Mr Vikram Kapur, Member Secretary, Chennai Metropolitan Development Authority, urged the developers to emulate the FMCG sector in keeping prices low to reach out to the mass market segment. It may be low margin business but the volumes are huge, he pointed out.

His ‘pet peeve,' Mr Kapur said, was that the lowest prices builders were offering were around Rs 10 lakh a residential unit and some were looking at products priced around Rs 5 lakh. What happens to those who could only afford around Rs 1.5-2 lakh, he asked.

For slum dwellers ousted by land acquisition for infrastructure projects, the CMDA has forwarded a proposal to the State Government envisaging issue of 20 sq.m of Transfer of Development Rights (TDRs), which developers could utilise to provide built-up space. The notification would soon be formalised, he said.

Cutting cost
The authorities were working closely with the developers to address issues to bring down costs. Approval processes were being speeded up and paper work simplified, Mr Kapur said.

Mr Prakash Challa, Vice-President, Credai national chapter, said the RBI should take steps to improve fund flow for projects. Huge inflows through FDI and QIPs were happening which were an indication of the vacuum left by the banks in funding for real estate projects. Banks' exposure to real estate was around Rs 95,000 crore which is less than 4 per cent of their loan portfolio. After the recent improvement in the residential market scenario, commercial properties are also looking up and banks need to channelise funds to the sector, he said.

More than 40 developers are showcasing a wide range of residential projects at Fairpro and offering attractive pricing schemes. Source: Hindu BusinessLine

Realty sector shifting focus to mass market

Build Intec fair to see business enquiries worth Rs 50 crore.

Mr K. Ilango

R. Yegya Narayanan, Coimbatore, Feb.17
As the real-estate market shifts its focus from the high-end segment to the mass market in Coimbatore, participation in the international construction trade fair Build Intec 2010, organised by the Coimbatore District Small Industries Association (Codissia) from Friday, will also reflect the shift in the focus of the industry, according to Mr K.Ilango, President, Codissia.
He expected the construction fair, which is basically a business-to-business (B2B) initiative, to generate business enquiries worth about Rs 50 crore, nearly double of what the previous edition generated in 2009.
Speaking to Business Line here, he said when his organisation conducted the first construction industry exhibition Build Expo in 2003, the real-estate market in Coimbatore was just beginning to enjoy the boom that lasted up to 2008. During the early years of the show, Codissia was looking at participants engaged in marketing/manufacturing fundamental building materials. Around 2005 when international trade opened up, imported materials started flooding the markets and the aspiration levels of the consumers began to change in terms of quality, aesthetic appeal, etc.
He said with the market heating up, the industry started focussing on luxury and high-end materials as builders, who were focussing in the early 2000s on apartments in the Rs 25-30 lakh range, shifted their attention towards apartments in the Rs 75 lakh - Rs 1 crore range, and the lower end of the realty market was ignored. But when the slowdown began in late 2008, the industry realised that the demand for high-end market could not be sustained because it was ‘speculation driven'.
Mr Ilango said the market is “now grounded more to reality” and the promoters have realised that they have to cater to the mass market. He said though the rest of the economy is on the road to recovery, the construction sector has “not started moving up” other than infrastructure sectors such as roads. But the market expectations, instead of being driven by ‘irrational exuberance', were more sober now and as the real wages of the workers go up, there would be greater demand for housing in the mass market segment.
He said the construction trade fairs organised by Codissia also reflected the changing preferences of the market. After going from low levels in the initial years to highly ‘euphoric levels' later, it is getting to reflect the ground reality of today. The products on display at the Codissia exhibition would reflect that trend. With growing mechanisation to cope with labour shortage, more machinery makers/people in automation segment are participating in the show.
He said the Codissia fair was more a B2B initiative than a property show that would be a B2C show. He expected visitors to come, apart from the Coimbatore region, from places such as Kochi, Mysore, Kozhikode, Tiruchi, Madurai, etc. A lot of new products on display at the exhibition would attract the attention of dealers in these cities and they may strike deals with manufacturers for distributorship in their areas.
On whether there was greater participation interest in the show this year compared with last year, Mr Ilango said unlike during the euphoric boom period when they could sell what they produced, companies are more ‘down to earth' in their expectations now and look for real users of the products for long-term growth.
Asked how the Coimbatore Codissia show was rated compared with similar exhibitions in other tier II cities in the region, he said there was a huge number of players in the infrastructure segment in tier II cities in the region. Build Intec was the largest among the fairs conducted in tier II cities in the South such as Madurai, Tiruchi, Kochi, Kozhikode and Mysore.
He said at the Jan 2009 Build Intec, it was estimated that business enquiries worth about Rs 25 crore-Rs 30 crore were generated. This year, this was expected to go up to Rs 50 crore plus. Source: Hindu BusinessLine